The Chinese economy remains fragile due to contracting production.

The trend of the Chinese yuan may still depreciate further amidst a stronger US dollar and increased returns on US government bonds. As of the latest data, China continues to support its economy consistently, maintaining the stability of the yuan's value, which allows companies to better control import costs.

China's foreign exchange reserves decreased to $3.12 trillion in September from $3.16 trillion in the previous month due to China's efforts to support the yuan, resulting in the sale of US dollar-denominated bonds. Additionally, the strengthening of the US dollar compared to other currencies has led to a trade imbalance, even though there has been no significant selling of the US dollar.

The manufacturing Purchasing Managers' Index (PMI) decreased to 50.6 in September, indicating a slight expansion in the sector after government support. However, production has expanded significantly, even as foreign orders have declined slightly. Increased production costs due to higher raw material prices have led some companies to consider layoffs.

The services sector PMI decreased to 50.2 in September, down from 51.8 the previous month, indicating only a slight increase in service activities due to weak demand, despite government support measures. Employment has increased for eight consecutive months but at the slowest rate in the past eight months.

As the global economy slows down, Chinese industrial companies' profits have also decreased, impacting both the public and private sectors, with profits down by 11.7% from the previous year, amounting to 4,655.82 billion yuan. Challenges persist from both domestic and international uncertainties, and trade barriers continue to affect the Chinese economy.

The yields on US 10-year government bonds have continued to rise due to the strong economic data in the United States, while investors and analysts anticipate further interest rate hikes by the US central bank this year and expect high-interest rates to persist. Meanwhile, the People's Bank of China has kept lending rates for 1-year and 5-year prime loans at 3.45% and 4.2%, respectively, after reducing them over the past several months.

Techical analysis data (5H)

Resistance: 7.2916, 7.2957, 7.3036

Support: 7.2797, 7.2717, 7.2677

Source: Investing.com